Small businesses likely to be off GST radar; council to decide on Thursday

The Goods and Services Tax (GST) Council will take a decision on increasing the turnover threshold for mandatory registration under the ambit of GST on Thursday, the group of ministers (GoM) said on Sunday. 

The threshold, currently at Rs 20 lakh, is likely to be increased to about Rs 50 lakh, which will benefit small businesses and micro-small and medium enterprises (MSMEs) with turnover Rs 20-50 lakh. 

The GoM also recommended a composition scheme for service providers with an annual turnover up to Rs  50 lakhs. For dealers and suppliers, the GoM has decided the turnover limit for registration under the scheme should be increased to Rs 1.5 crore.

Composition dealers under this expansion would need to file annual returns as against quarterly returns. However, they will have to pay the GST quarterly, with a new simple challan, the GoM said in its recommendations to the GST Council. 

Further, they will also get the GST accounting software free from the government. 

Another GoM, headed by Sushil Kumar Modi, decided Kerala should be allowed to levy a calamity cess for a period of two years. Further, it also kept a view that the Fiscal Responsibility and Budget Management (FRBM) Act should be amended to relax borrowing limits for states that are facing a post-calamity crisis. 

The rate of the recommended state-specific calamity cess would be capped at 1 per cent over the value of goods and services, and the state would have the flexibility of keeping it 'at' or 'below' 1 per cent over a period of two years. 

"The GoM has recommended a cess that Kerala can levy, but this will set a precedent for any state that needs financial assistance after a calamity," said Thomas Isaac, finance minister of Kerala. 

"The GoM found that it will not be practical to have an all-India cess since it would be difficult to distribute among states, and moreover it will be the repetition of the existing mechanism," he added. 

The flood-affected state will have the flexibility to levy it on select goods and services or across the board. The final decision on all these recommendations will be taken by the GST Council that will meet on Thursday.

On increasing the turnover threshold for mandatory GST registration, Modi said while there were differing views on the exact limit, the "majority view" was to increase the threshold. 

Against the recommendation of finance ministry to increase it to Rs 75 lakh, Bihar recommended it to be Rs 50 lakh, while Delhi, Rs 40 lakh. 

The GoM also discussed a possibility of levying a flat GST of Rs 5,000 per year for businesses with turnover between Rs 50 lakh and Rs 60 lakh, and above Rs 10,000 per year for those with turnover between Rs 60 lakh and Rs 75 lakh. 

However, only business to commerce (B2C) businesses will be able to avail this benefit. Business to business (B2B) entities doing inter-state trade will not be benefited from the extension.